Amidst a shortage of essential commodities in Sri Lanka, India has announced a $900 million loan to the island nation to build up its depleted foreign reserves and import of food items.
The governor of the Central Bank Ajith Nivard Cabraal said on Wednesday that Sri Lanka is negotiating a $1 billion loan from India to import goods from the country, which according to him has reached its advanced stage.
The Indian High Commissioner to Sri Lanka Gopal Baglay met Cabraal on Thursday and expressed India’s strong support to Sri Lanka in the wake of RBI extending over $900 million facilities over the last week.
“These include deferment of Asian Clearing Union settlement of over $509 million and currency swap of $400 million,” the tweet said.
Cabraal claimed that the forthcoming Indian loan would be for food imports.
Commenting on India’s gesture, analysts here said the Indian assistance could have contributed to Sri Lanka’s doubling of reserves announced at the end of December.
The central bank said that the reserve position had doubled to $3 billion from being down to $1.5 billion by December or sufficient for just a month’s imports.
Sri Lanka is currently experiencing a shortage of almost all essentials due to a shortage of dollars to pay for the imports. Additionally, power cuts are imposed at peak hours as the state power entity is unable to obtain fuel to run turbines. The state fuel entity has stopped oil supplies as the electricity board has large unpaid bills.
The only refinery was shut as it was unable to pay dollars for crude imports.
